ONE EGG Scan for January 7th

Tuesday continued the selling, but it did find some support intraday and closed off the low of the day. That sets up a possible move on the upside for Wednesday as the future are slightly higher as I post this. IF you bought SDS as posted, set your stops higher into the open and watch how the day plays out. Positive open doesn’t mean the selling is over. Being disciplined in trading is key to protecting your assets. $22.75 is logical spot.

If the bounce transpires this morning it will initially be relief to the five days of selling. Unless it is accompanied by a catalyst we have to assume the downside or sellers still maintain control. Trade you plan as you start the trading day.

Sectors Worthy of Attention: 

Crude oil is heading lower again and the downside move has come back into play short term. SCO jumped higher again to end the week and is worthy of attention. Added to the downside on Tuesday. Short side is still in play. (Wednesday: watch the bounce in crude as it has already move back above the $48 level early. I would still be inclined to short any rally more than buy it.)

Emerging markets (EDZ) returned to the downside again as the uncertainty about the global markets were renewed. Greece is part of the issue along with the stronger dollar. Watch downside opportunity this week. Added to the downside on Monday and short trade is working. (Wednesday: watch for a relief bounce as it may give another short entry opportunity short term.)

Treasury bond (TMF) rotation back to safety to end the week pushed the bond higher again and the yield back near the December lows. Watch to see how that story unfolds this week as well. Added to the upside on Monday with the uncertainty rotating money in the direction of safety. (Wednesday: watching the response of traders in the sector… could see some short term profit taking.)

Gold and gold miners (GDX) made a nice move higher on Friday and has attempted to bounce off the lows. Looking for follow through to start the week a possible trade opportunities. Added to the upside with nice move on Monday. (Wednesday: could see some profit taking in the sector as markets calm.)

REITs (DRN) sold on Thursday, but made nice bounce on Friday to keep the uptrend intact. Flight to quality or dividends is in play and added upside on Tuesday.

Markets are still playing the worry game as the uncertainty returned last week with oil prices dropping, economic data disappointing and the global markets showing more weakness. Don’t be surprised if this feeds on itself more going forward. Bounce on Wednesday with futures higher is just that and it will have to validate itself to be more.

Running the Daily EGG Scans: 

We started the week with a downside bias and we have to respect the potential trend shift in play. Be patient and take what the market gives. Monday confirmed this belief and we are now looking at trading the downside move with an eye of the key support at 1972 on the S&P 500 index.

Short S&P 500 index double top pattern could complete and offer downside trade short term. Confirmed on Monday – missed the entry, but protect against the bounce trade on Wednesday.

Short NASDAQ index with same double top pattern that could complete a reversal and short term downside trade opportunity. QID moved above the $40 mark for entry Monday and watching for continuation as well. Watch the upside Wednesday with the futures trading higher? Needs to confirm buyers are in play.

Gold miners (GDX) breaking from a bottom consolidation offers some upside opportunity as well with a short term target of $20.30. Monday hit the $19 entry point and watching for the target o hit short term. Hit the target on Tuesday lock in your profits today. 

Current EGG Proposed:

Watch day as the futures reverse to the upside. Look for follow through as the last two days have opened to the upside and closed lower. Gap open will make it even more interesting on the day. Patience is key.